SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 4, 1998.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-9567
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: (781) 622-1000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest
practicable date.
Class Outstanding at May 1, 1998
---------------------------- --------------------------
Common Stock, $.10 par value 36,775,239 Actual
41,655,772 Pro Forma
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
THERMEDICS INC.
Consolidated Balance Sheet
(Unaudited)
Assets
April 4, January 3,
(In thousands) 1998 1998
----------------------------------------------------------------------
Current Assets:
Cash and cash equivalents (includes $111,401
and $175,101 under repurchase agreement
with affiliated company) $151,403 $187,012
Short-term available-for-sale investments,
at quoted market value (amortized cost
of $78,989 and $58,144) 79,133 58,317
Accounts receivable, less allowances of
$4,094 and $4,207 57,602 61,488
Inventories:
Raw materials and supplies 23,960 23,857
Work in process 18,656 18,218
Finished goods 18,337 17,499
Prepaid income taxes and expenses 12,749 12,769
-------- --------
361,840 379,160
-------- --------
Property, Plant, and Equipment, at Cost 56,913 55,597
Less: Accumulated depreciation and
amortization 35,552 33,986
-------- --------
21,361 21,611
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $26,455 and $12,655) 26,456 12,665
-------- --------
Other Assets 11,747 12,139
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 110,414 110,977
-------- --------
$531,818 $536,552
======== ========
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THERMEDICS INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 4, January 3,
(In thousands except share amounts) 1998 1998
------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturity of
long-term obligation $ 7,638 $ 7,498
Accounts payable 18,349 18,020
Accrued payroll and employee benefits 9,055 12,576
Accrued commissions 3,452 3,389
Accrued income taxes 9,953 6,815
Accrued warranty costs 3,764 3,784
Other accrued expenses 14,379 15,449
Due to parent company and affiliated companies 2,901 2,266
-------- --------
69,491 69,797
-------- --------
Deferred Income Taxes and Other Deferred Items 175 177
-------- --------
Long-term Obligations:
Subordinated convertible obligations (Note 4) 131,239 142,750
Other 13 21
-------- --------
131,252 142,771
-------- --------
Minority Interest 89,302 96,461
-------- --------
Shareholders' Investment (Note 2):
Common stock, $.10 par value, 100,000,000
shares authorized; 41,738,108 and
36,846,175 shares issued 4,174 3,685
Capital in excess of par value 119,655 113,913
Retained earnings 122,607 116,034
Treasury stock at cost, 83,086 and 134,172
shares (1,818) (3,449)
Accumulated other comprehensive items (Note 6) (3,020) (2,837)
-------- --------
241,598 227,346
-------- --------
$531,818 $536,552
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMEDICS INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
----------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
------------------------------------------------------------------------
Revenues $75,661 $72,057
------- -------
Costs and Operating Expenses:
Cost of revenues 38,661 36,961
Selling, general, and administrative expenses 21,061 21,964
Research and development expenses 6,629 5,584
------- -------
66,351 64,509
------- -------
Operating Income 9,310 7,548
Interest Income 3,665 2,637
Interest Expense (1,206) (269)
Gain on Issuance of Stock by Subsidiary - 17,075
Gain on Sale of Investments, Net 18 -
------- -------
Income Before Provision for Income Taxes,
Minority Interest, and Extraordinary Item 11,787 26,991
Provision for Income Taxes 4,769 3,764
Minority Interest Expense 1,650 1,261
------- -------
Income Before Extraordinary Item 5,368 21,966
Extraordinary Item, Net of Provision for Income
Taxes of $780 (Note 4) 1,205 -
------- -------
Net Income $ 6,573 $21,966
======= =======
Earnings per Share Before Extraordinary
Item (Note 5):
Basic $ .13 $ .60
======= =======
Diluted $ .13 $ .56
======= =======
Earnings per Share (Note 5):
Basic $ .16 $ .60
======= =======
Diluted $ .16 $ .56
======= =======
Weighted Average Shares (Note 5):
Basic 39,857 36,683
======= =======
Diluted 41,925 38,956
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMEDICS INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
---------------------
April 4, March 29,
(In thousands) 1998 1997
----------------------------------------------------------------------
Operating Activities:
Net income $ 6,573 $ 21,966
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,629 2,563
Provision for losses on accounts
receivable 111 202
Gain on issuance of stock by subsidiary - (17,075)
Gain on sale of investments, net (18) -
Gain on repurchase of subordinated
convertible debentures (Note 4) (1,985) -
Minority interest expense 1,650 1,261
Other noncash expenses 232 16
Changes in current accounts, excluding
the effects of acquisition:
Accounts receivable 3,553 2,906
Inventories (1,520) (2,389)
Prepaid income taxes and expenses 10 (443)
Accounts payable 530 (225)
Other current liabilities (770) 2,142
Other (161) -
-------- --------
Net cash provided by operating activities 10,834 10,924
-------- --------
Investing Activities:
Acquisition, net of cash acquired - (1,059)
Purchases of available-for-sale investments (80,950) (18,596)
Proceeds from sale and maturities of
available-for-sale investments 46,456 32,008
Purchases of property, plant, and equipment (1,701) (2,163)
Other (364) 147
-------- --------
Net cash provided by (used in) investing
activities $(36,559) $ 10,337
-------- --------
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THERMEDICS INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
---------------------
April 4, March 29,
(In thousands) 1998 1997
----------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of Company and
subsidiaries' common stock $ 107 $ 28,446
Purchases of Company and subsidiaries'
common stock (1,054) (3,911)
Repurchase of subordinated convertible
debentures (Note 4) (9,337) -
Net increase in short-term borrowings 166 773
International Technidyne transfer from
parent company - 384
-------- --------
Net cash provided by (used in) financing
activities (10,118) 25,692
-------- --------
Exchange Rate Effect on Cash 234 499
-------- --------
Increase (Decrease) in Cash and Cash
Equivalents (35,609) 47,452
Cash and Cash Equivalents at Beginning of
Period 187,012 82,800
-------- --------
Cash and Cash Equivalents at End of Period $151,403 $130,252
======== ========
Noncash Activities:
Fair value of assets of acquired company $ - $ 1,433
Cash paid for acquired company - (1,059)
-------- --------
Liabilities assumed of acquired company $ - $ 374
======== ========
Conversions of subsidiaries' convertible
obligations $ - $ 4,650
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMEDICS INC.
Notes to Consolidated Financial Statements
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 the financial position at April
4, 1998, the results of operations for the three-month periods ended
April 4, 1998, and March 29, 1997, and the cash flows for the three-month
periods ended April 4, 1998, and March 29, 1997. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of January 3, 1998, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public 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 January 3, 1998, filed with
the Securities and Exchange Commission.
2. Common Stock
On February 5, 1998, the Company's Board of Directors voted to issue
4,880,533 shares of its common stock to Thermo Electron Corporation in
exchange for 100% of the stock of TMO TCA Holdings Inc., which is the
beneficial owner of 3,355,705 shares of common stock of the Company's
Thermo Cardiosystems Inc. subsidiary. The Company's issuance of the
4,880,533 shares of its common stock to Thermo Electron is subject to
approval by the Company's shareholders. However, because Thermo Electron
is the majority shareholder and intends to vote its shares in favor of
the transaction, approval is assured and, therefore, the shares are
considered to be outstanding as of February 5, 1998, for purposes of
computing weighted average shares. The shares of common stock will be
exchanged at their respective fair market values as of February 5, 1998.
3. Offer to Acquire the Outstanding Common Stock of Thermo Voltek Corp.
On March 31, 1998, the Company proposed to acquire, through a merger,
all of the outstanding shares of common stock of Thermo Voltek Corp. (a
publicly traded, majority-owned subsidiary) that the Company does not
own, at a price of $7.00 per share in cash. In addition, the proposal
contemplates the redemption of Thermo Voltek's $5.3 million principal
amount of 3 3/4% subordinated convertible debentures due 2000. As of
April 4, 1998, the Company owned 67% of the outstanding common stock of
Thermo Voltek. In addition, Thermo Electron owns approximately 3% of the
outstanding common stock of Thermo Voltek.
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THERMEDICS INC.
3. Offer to Acquire the Outstanding Common Stock of Thermo Voltek Corp.
(continued)
On March 31, 1998, complaints were filed by certain shareholders of
Thermo Voltek, each attempting to act on behalf of Thermo Voltek's public
shareholders. The complaints allege, among other things, that the
proposed price of $7.00 per share to be paid to the shareholders of
Thermo Voltek is unfair and grossly inadequate.
Thermo Voltek has appointed a special committee, comprised of its
independent directors, to evaluate the proposal with the assistance of a
financial advisor, to be selected. The merger is contingent upon, among
other things, the negotiation and execution of a definitive merger
agreement; receipt by Thermo Voltek's Board of Directors of an opinion by
an investment banking firm that the Company's offer is fair to Thermo
Voltek's shareholders (other than the Company and Thermo Electron) from a
financial point of view; the approval of Thermo Voltek's Board of
Directors upon recommendation of its special committee; and clearance by
the Securities and Exchange Commission of the proxy materials regarding
the proposed transaction.
4. Repurchase of Subordinated Convertible Debentures
During the first quarter of 1998, the Company and a majority-owned
subsidiary repurchased $11.5 million principal amount of subordinated
convertible debentures for $9.3 million in cash, resulting in an
extraordinary gain of $1.2 million, net of taxes of $0.8 million.
8PAGE
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THERMEDICS INC.
5. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended
---------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
-----------------------------------------------------------------------
Basic
Income before extraordinary item $ 5,368 $21,966
Extraordinary item, net of tax 1,205 -
-------- -------
Net income $ 6,573 $21,966
======== =======
Weighted average shares 36,746 36,683
Effect of shares issuable in exchange for
Thermo Cardiosystems common stock 3,111 -
-------- -------
Basic weighted average shares 39,857 36,683
-------- -------
Basic earnings per share:
Before extraordinary item $ .13 $ .60
Extraordinary item, net of tax .03 -
-------- -------
$ .16 $ .60
======== =======
Diluted
Income before extraordinary item $ 5,368 $21,966
Effect of majority-owned subsidiaries' dilutive
securities (16) (9)
-------- -------
Income available to common shareholders, before
extraordinary item, as adjusted 5,352 21,957
Extraordinary item, net of tax 1,205 -
-------- -------
Income available to common shareholders,
as adjusted $ 6,557 $21,957
======== =======
Basic weighted average shares 39,857 36,683
Effect of:
Convertible obligations 1,933 1,989
Stock options 135 284
-------- -------
Weighted average shares, as adjusted 41,925 38,956
-------- -------
Diluted earnings per share:
Before extraordinary item $ .13 $ .56
Extraordinary item, net of tax .03 -
-------- -------
$ .16 $ .56
======== =======
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THERMEDICS INC.
5. Earnings per Share (continued)
The computation of diluted earnings per share excludes the effect of
assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. As of January 3, 1998, there were 1,044,000
of such options outstanding, with exercise prices ranging from $16.05 to
$29.08 per share.
6. Comprehensive Income
During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." This pronouncement sets forth requirements for disclosure of the
Company's comprehensive income and accumulated other comprehensive items.
In general, comprehensive income combines net income and "other
comprehensive items," which represent certain amounts that are reported
as components of shareholders' investment in the accompanying balance
sheet, including foreign currency translation adjustments and unrealized
net of tax gains and losses from available-for-sale investments. During
the first quarter of 1998 and 1997, the Company's comprehensive income
totaled $6.4 million and $20.2 million, respectively.
7. Proposed Acquisition
In March 1998, the Company's Thermo Sentron Inc. subsidiary agreed to
acquire the three businesses that constitute the product-monitoring group
of Smiths Industries plc's Graseby plc division (the product-monitoring
businesses) for approximately 26.4 British pounds sterling (approximately
$44 million). The product-monitoring businesses design, manufacture, and
distribute specialized packaged-goods equipment, including checkweighers
and metal detectors, for the food and pharmaceutical industries. The
product-monitoring businesses are based in the United Kingdom and had
combined revenues in calendar 1997 of approximately $46.0 million. The
acquisition is subject to the satisfaction of certain closing conditions
and receipt of regulatory approvals, including antitrust clearance from
the Department of Justice.
Item 2 - Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the heading "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998, filed with the Securities and Exchange
Commission.
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THERMEDICS INC.
Overview
The Company's business is divided into two segments: Instruments and
Other Equipment, and Biomedical Products. The Instruments and Other
Equipment segment includes the Company's Thermo Sentron Inc. subsidiary,
which designs, develops, manufactures, and sells high-speed
precision-weighing and inspection equipment for industrial production and
packaging lines; its Thermedics Detection Inc. subsidiary, which
develops, manufactures, and markets high-speed detection instruments used
in a variety of on-line industrial process applications, security
applications, and laboratory analysis, as well as electrode-based,
chemical-measurement products; and its Thermo Voltek Corp. subsidiary,
which manufactures electronic-test instruments and a range of products
related to power amplification, conversion, and quality.
As part of its Biomedical Products segment, the Company's Thermo
Cardiosystems Inc. subsidiary manufactures two implantable left
ventricular-assist systems (LVAS): a pneumatic, or air-driven, system and
an electric version. Thermo Cardiosystems' electric LVAS is being used in
Europe as a bridge to transplant and as an alternative to medical
therapy. According to terms set by the U.S. Food and Drug Administration
(FDA), no profit can be earned from the sale of an LVAS in the U.S. until
the FDA has approved the device for commercial sale. With the FDA's
approval, the Company began earning a profit on the sale of its
air-driven LVAS in 1994. Until FDA approval has been obtained, the
Company may not earn a profit on the sale in the U.S. of other products,
such as the electric LVAS, currently used in clinical studies. Thermo
Cardiosystems' International Technidyne Corporation subsidiary is a
leading manufacturer of near-patient, whole-blood coagulation testing
equipment and related disposables and also manufactures premium-quality,
single-use skin-incision devices. The Company also develops and
manufactures enteral nutrition-delivery systems and a line of
medical-grade polymers used in medical disposables and nonmedical,
industrial applications, including safety glass and automotive coatings.
A significant amount of the Company's revenues is derived from sales
of products outside of the U.S., through export sales and sales by the
Company's foreign subsidiaries. The Company expects an increase in the
percentage of revenues derived from international operations. Although
the Company seeks to charge its customers in the same currency as its
operating costs, the Company's financial performance and competitive
position can be affected by currency exchange rate fluctuations between
the U.S. dollar and foreign currencies. Where appropriate, the Company
uses forward contracts to reduce its exposure to currency fluctuations.
Results of Operations
First Quarter 1998 Compared With First Quarter 1997
---------------------------------------------------
Total revenues were $75.7 million in the first quarter of 1998,
compared with $72.1 million in the first quarter of 1997. Instruments and
Other Equipment segment revenues increased to $54.1 million in 1998 from
$53.2 million in 1997, primarily due to increases in revenues of $1.7
11PAGE
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THERMEDICS INC.
First Quarter 1998 Compared With First Quarter 1997 (continued)
---------------------------------------------------
million and $0.9 million at Thermo Voltek and Thermo Sentron,
respectively, offset in part by a decrease in revenues of $1.8 million at
Thermedics Detection.
Revenues from Thermo Voltek increased to $11.4 million in 1998 from
$9.7 million in 1997, primarily due to $1.0 million in revenues from the
acquisition of Milmega Ltd. in April 1997, as well as an increase in
revenues from electromagnetic compatibility test instruments in 1998 as
compared to 1997. Revenues from Thermo Sentron increased to $18.9 million
in 1998 from $18.0 million in 1997, primarily due to increased product
demand and revenues of $0.9 million from acquired businesses. These
increases were offset in part by a decrease of $0.9 million due to the
impact of a stronger U.S. dollar relative to currencies in foreign
countries in which Thermo Sentron operates. Revenues at Thermedics
Detection decreased to $23.7 million in 1998 from $25.5 million in 1997.
Revenues from Thermedics Detection's industrial process instruments and
related services decreased to $7.1 million in 1998 from $10.6 million in
1997, primarily as a result of the fulfillment in 1997 of a mandated
product-line upgrade for The Coca-Cola Company to its existing installed
base and a $0.5 million decrease in revenues from moisture analyzers,
primarily due to a slowdown in product demand in North America. These
decreases in revenues were offset in part by an increase in revenues from
Thermedics Detection's EGIS(R) explosives-detection systems and related
services to $2.4 million in 1998 from $1.0 million in 1997, primarily due
to $1.1 million of shipments under a contract with the U.S. Federal
Aviation Administration (FAA), which was awarded to Thermedics Detection
in May 1997. Product shipments under this contract were completed in the
first quarter of 1998.
Biomedical Products segment revenues increased to $21.6 million in
the first quarter of 1998 from $18.8 million in the first quarter of
1997. Revenues from Thermo Cardiosystems increased to $16.5 million in
1998 from $14.9 million in 1997, primarily due to an increase in revenues
from its air-driven LVAS, offset in part by a decrease in revenues from
its electric LVAS. In April 1998, Thermo Cardiosystems received
conditional approval from the FDA for engineering advancements made to
the electric LVAS. The conditional approval of these advancements is
contingent upon the Company responding to a series of additional
questions relating to the submission. The Company anticipates that its
response will be completed within several weeks of receipt of the
conditional approval. In addition, revenues from the Company's Polymer
Products division increased $0.9 million due to an increase in demand for
its polymer film product line.
The gross profit margin was unchanged at 49% in the first quarter of
1998 and 1997. The gross profit margin for the Instruments and Other
Equipment segment remained unchanged at 47% in the first quarter of 1998
and 1997. The gross profit margin increased at Thermo Voltek, primarily
due to an increase in the sale of certain higher-margin products, as well
as the effect of an increase in Thermo Voltek's total revenues. This
increase was offset by a decline in the gross profit margin at Thermedics
12PAGE
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THERMEDICS INC.
First Quarter 1998 Compared With First Quarter 1997 (continued)
---------------------------------------------------
Detection, primarily due to a decrease in higher-margin service revenues,
as well as higher costs relating to Thermedics Detection's contract with
the FAA.
The gross profit margin for the Biomedical Products segment increased
to 54% in the first quarter of 1998 from 53% in the first quarter of
1997. The gross profit margin at Thermo Cardiosystems increased as a
result of a shift in the sales mix to higher-margin air-driven LVAS and,
to a lesser extent, an increase in revenues from higher-margin
International Technidyne products. These increases were offset in part by
a decrease in the gross profit margin at the Company's Polymer Products
division due to increased sales of its lower-margin polymer film product
line.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 28% in the first quarter of 1998 from 30% in the
first quarter of 1997. The decrease was primarily due to a decrease in
Thermo Voltek's selling, general, and administrative expenses as a
percentage of revenues due to efficiencies gained from operational,
organizational, and personnel changes implemented in 1997.
Research and development expenses increased to $6.6 million in the
first quarter of 1998 from $5.6 million in the first quarter of 1997. The
increase was primarily due to increased expenses at Thermedics Detection
to develop new products and, to a lesser extent, increased expenses at
Thermo Cardiosystems primarily due to expenses incurred in association
with a clinical trial being conducted by Thermo Cardiosystems to evaluate
the electric LVAS as an alternative to medical therapy.
Interest income increased to $3.7 million in the first quarter of
1998 from $2.6 million in the first quarter of 1997, primarily due to
higher average invested balances at Thermo Cardiosystems as a result of
its May 1997 issuance of $70.0 million principal amount of 4 3/4%
subordinated convertible debentures, and at Thermedics Detection as a
result of its March 1997 initial public offering of common stock.
Interest expense increased to $1.2 million in 1998 from $0.3 million in
1997, primarily as a result of Thermo Cardiosystems' issuance of the
4 3/4% subordinated convertible debentures.
The effective tax rates were 40% and 14% in the first quarter of 1998
and 1997, respectively. The effective tax rate in 1998 exceeded the
statutory federal income tax rate primarily due to the impact of state
income taxes and nondeductible amortization of cost in excess of net
assets of acquired companies. The effective tax rate in 1997 was below
the statutory federal income tax rate primarily due to the nontaxable
gain on issuance of stock by subsidiary, offset in part by the impact of
state income taxes and nondeductible amortization of cost in excess of
net assets of acquired companies.
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THERMEDICS INC.
First Quarter 1998 Compared With First Quarter 1997 (continued)
---------------------------------------------------
Minority interest expense increased to $1.7 million in the first
quarter of 1998 from $1.3 million in the first quarter of 1997, primarily
due to higher profits at Thermo Cardiosystems and Thermo Voltek, offset
in part by lower profits at Thermedics Detection.
In the first quarter of 1998, the Company and a majority-owned
subsidiary repurchased $11.5 million principal amount of subordinated
convertible debentures for $9.3 million in cash, resulting in an
extraordinary gain of $1.2 million, net of related income taxes of $0.8
million (Note 4).
Liquidity and Capital Resources
Consolidated working capital was $292.3 million at April 4, 1998,
compared with $309.4 million at January 3, 1998. Cash, cash equivalents,
and short- and long-term available-for-sale investments were $257.0
million at April 4, 1998, compared with $258.0 million at January 3,
1998. Of the $257.0 million balance at April 4, 1998, $218.6 million was
held by the Company's majority-owned subsidiaries, and the remainder by
the Company and its wholly owned subsidiaries.
During the first quarter of 1998, $10.8 million of cash was provided
by operating activities. Cash of $3.6 million was provided by a decrease
in accounts receivable, primarily at Thermedics Detection due to
decreased revenues. This increase in cash was partially offset by cash of
$1.5 million used to fund an increase in inventories, primarily due to
purchases for the production of Thermedics Detection's EZ Flash, expected
to begin in May 1998.
Excluding available-for-sale investment activity, the Company's
primary investing activity during the first quarter of 1998 was the
purchase of property, plant, and equipment for $1.7 million. During the
remainder of 1998, the Company expects to make capital expenditures of
approximately $8.4 million.
During the first quarter of 1998, the Company's financing activities
used cash of $10.1 million. The Company and a majority-owned subsidiary
expended $9.3 million for the repurchase of subordinated convertible
debentures (Note 4).
The Company intends, for the foreseeable future, to maintain at least
50% ownership of its majority-owned subsidiaries. This may require the
Company to purchase additional shares of common stock or, if applicable,
convertible debentures (which are then converted) of these companies from
time to time, as the number of these 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 (i) in the open market or in negotiated
transactions, (ii) directly from Thermo Electron or the relevant
subsidiary, or (iii) in the case of Thermo Voltek, pursuant to the
conversion of all or part of its subordinated convertible notes held by
the Company.
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THERMEDICS INC.
Liquidity and Capital Resources (continued)
During the first quarter of 1998, the Company and certain of its
majority-owned subsidiaries expended $6.9 million and $3.5 million,
respectively, to purchase securities of the Company and certain of its
majority-owned subsidiaries. These purchases were made pursuant to
authorizations by the Company and the applicable majority-owned
subsidiaries' Boards of Directors. In March 1998, the Company's Board of
Directors authorized the repurchase, through March 5, 1999, of up to an
additional $10.0 million of its own securities and those of its
majority-owned subsidiaries in the open market, or in negotiated
transactions. As of April 4, 1998, $3.8 million and $17.8 million
remained under the Company's and its majority-owned subsidiaries'
authorizations, respectively. Any such purchases are funded from working
capital.
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. In March 1998, the Company proposed to acquire, through a
merger, all of the outstanding shares of Thermo Voltek's common stock
that the Company does not own, as well as redeem Thermo Voltek's $5.3
million principal amount of 3 3/4% subordinated convertible debentures
due 2000. The total transaction cost is estimated to be approximately $27
million, which would be paid from internal funds. In March 1998, the
Company's Thermo Sentron subsidiary agreed to acquire the three
businesses that constitute the product-monitoring group of Smith
Industries plc's Graseby plc division for approximately 26.4 million
British pounds sterling (approximately $44 million) (Note 3). The
purchase price would be paid by a combination of internal funds and
short-term borrowings from Thermo Electron. While the Company currently
has no other agreements to make any acquisitions, it expects that it
would finance any acquisitions through a combination of internal funds,
additional debt or equity financing from the capital markets, or
short-term borrowings from Thermo Electron, although its has no agreement
with Thermo Electron that assures funds will be available on acceptable
terms or at all. The Company believes that 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.
15PAGE
<PAGE>
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 12th day of May 1998.
THERMEDICS INC.
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer
and Senior Vice President
16PAGE
<PAGE>
THERMEDICS INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMEDICS
INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED APRIL 4, 1998 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> JAN-02-1999
<PERIOD-END> APR-04-1998
<CASH> 151,403
<SECURITIES> 79,133
<RECEIVABLES> 61,696
<ALLOWANCES> 4,094
<INVENTORY> 60,953
<CURRENT-ASSETS> 361,840
<PP&E> 56,913
<DEPRECIATION> 35,552
<TOTAL-ASSETS> 531,818
<CURRENT-LIABILITIES> 69,491
<BONDS> 131,252
0
0
<COMMON> 4,174
<OTHER-SE> 237,424
<TOTAL-LIABILITY-AND-EQUITY> 531,818
<SALES> 75,661
<TOTAL-REVENUES> 75,661
<CGS> 38,661
<TOTAL-COSTS> 38,661
<OTHER-EXPENSES> 6,629
<LOSS-PROVISION> 111
<INTEREST-EXPENSE> 1,206
<INCOME-PRETAX> 11,787
<INCOME-TAX> 4,769
<INCOME-CONTINUING> 5,368
<DISCONTINUED> 0
<EXTRAORDINARY> 1,205
<CHANGES> 0
<NET-INCOME> 6,573
<EPS-PRIMARY> .13
<EPS-DILUTED> .16
</TABLE>
