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 September 28, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-9786
THERMO INSTRUMENT SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1275 Hammerwood Avenue
Sunnyvale, California 94089
(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 October 25, 1996
---------------------------- -------------------------------
Common Stock, $.10 par value 96,694,123
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO INSTRUMENT SYSTEMS INC.
Consolidated Balance Sheet
(Unaudited)
Assets
September 28, December 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 362,360 $ 395,233
Available-for-sale investments, at quoted
market value (amortized cost of $10,543) 10,562 -
Accounts receivable, less allowances
of $18,335 and $12,569 292,698 211,906
Unbilled contract costs and fees 5,300 3,800
Inventories:
Raw materials and supplies 109,881 80,959
Work in process 61,367 40,851
Finished goods 56,992 33,104
Prepaid expenses 17,703 9,450
Prepaid income taxes 46,770 31,233
---------- ----------
963,633 806,536
---------- ----------
Property, Plant and Equipment, at Cost 251,229 189,085
Less: Accumulated depreciation and
amortization 68,957 55,408
---------- ----------
182,272 133,677
---------- ----------
Patents and Other Assets 29,542 29,611
---------- ----------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 588,300 402,989
---------- ----------
$1,763,747 $1,372,813
========== ==========
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THERMO INSTRUMENT SYSTEMS INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 28, December 30,
(In thousands except share amounts) 1996 1995
----------------------------------------------------------------------------
Current Liabilities:
Notes payable, including $65,000 due to
parent company in 1996 (Note 2) $ 159,594 $ 55,822
Accounts payable 79,465 55,626
Accrued payroll and employee benefits 48,197 33,025
Accrued income taxes 26,104 25,875
Accrued installation and warranty expenses 43,576 17,962
Deferred revenue 34,495 20,759
Accrued acquisition expenses (Note 2) 38,699 20,687
Other accrued expenses 104,021 73,966
Due to parent company 8,875 12,919
---------- ----------
543,026 316,641
---------- ----------
Deferred Income Taxes 22,599 20,168
---------- ----------
Other Deferred Items 30,476 23,718
---------- ----------
Long-term Obligations:
Senior convertible obligations, including
$140,000 due to parent company 165,299 207,600
Subordinated convertible obligations (Note 4) 192,500 214,775
Other, including $15,000 due to parent company 27,154 18,659
---------- ----------
384,953 441,034
---------- ----------
Minority Interest 76,919 28,547
---------- ----------
Shareholders' Investment:
Common stock, $.10 par value, 250,000,000
shares authorized; 97,441,805 and
92,566,341 shares issued 9,744 9,257
Capital in excess of par value 314,173 248,468
Retained earnings 391,750 291,890
Treasury stock at cost, 763,535 and
917,985 shares (8,764) (9,724)
Cumulative translation adjustment (1,142) 2,814
Net unrealized gain on available-for-sale
investments 13 -
---------- ----------
705,774 542,705
---------- ----------
$1,763,747 $1,372,813
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO INSTRUMENT SYSTEMS INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
----------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues $315,292 $193,899
-------- --------
Costs and Expenses:
Cost of revenues 167,489 100,364
Selling, general and administrative expenses 90,087 56,112
Research and development expenses 22,197 13,908
-------- --------
279,773 170,384
-------- --------
Operating Income 35,519 23,515
Interest Income 4,821 3,776
Interest Expense (includes $2,502 and $1,418
to parent company) (7,248) (4,490)
Gain on Issuance of Stock by Subsidiaries
(Note 3) 11,350 9,333
-------- --------
Income Before Provision for Income Taxes
and Minority Interest Expense 44,442 32,134
Provision for Income Taxes 12,351 9,850
Minority Interest Expense 1,570 403
-------- --------
Net Income $ 30,521 $ 21,881
======== ========
Earnings per Share:
Primary $ .32 $ .24
======== ========
Fully diluted $ .29 $ .22
======== ========
Weighted Average Shares:
Primary 96,598 91,130
======== ========
Fully diluted 107,467 106,806
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO INSTRUMENT SYSTEMS INC.
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
-----------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
-------------------------------------------------------------------------
Revenues $862,415 $552,587
-------- --------
Costs and Expenses:
Cost of revenues 462,724 283,222
Selling, general and administrative expenses 250,852 157,597
Research and development expenses 61,969 40,098
Write-off of acquired technology (Note 2) 3,500 -
-------- --------
779,045 480,917
-------- --------
Operating Income 83,370 71,670
Interest Income 14,171 9,030
Interest Expense (includes $6,562 and $4,199
to parent company) (20,765) (12,187)
Gain on Issuance of Stock by Subsidiaries
(Note 3) 61,133 18,878
-------- --------
Income from Continuing Operations Before
Provision for Income Taxes and Minority
Interest Expense 137,909 87,391
Provision for Income Taxes 34,807 29,104
Minority Interest Expense 3,242 819
-------- --------
Income from Continuing Operations 99,860 57,468
Income from Discontinued Operations - 2
-------- --------
Net Income $ 99,860 $ 57,470
======== ========
Earnings per Share from Continuing Operations:
Primary $ 1.06 $ .64
======== ========
Fully diluted $ .96 $ .58
======== ========
Earnings per Share:
Primary $ 1.06 $ .64
======== ========
Fully diluted $ .96 $ .58
======== ========
Weighted Average Shares:
Primary 94,516 90,276
======== ========
Fully diluted 107,410 106,699
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO INSTRUMENT SYSTEMS INC.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
-----------------------------
September 28, September 30,
(In thousands) 1996 1995
----------------------------------------------------------------------------
Operating Activities:
Net income $ 99,860 $ 57,470
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 34,164 18,344
Provision for losses on accounts receivable 2,140 1,486
Gain on issuance of stock by
subsidiaries (Note 3) (61,133) (18,878)
Write-off of acquired technology (Note 2) 3,500 -
Minority interest expense 3,242 819
Increase (decrease) in deferred income taxes (265) 70
Other noncash expenses 3,871 2,357
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 12,280 (4,593)
Inventories (3,064) (9,861)
Other current assets (946) 1,196
Accounts payable (15,715) 6,021
Other current liabilities (23,262) (24,963)
Other 254 3
--------- ---------
Net cash provided by
operating activities 54,926 29,471
--------- ---------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (242,935) (46,448)
Purchases of available-for-sale investments (10,250) -
Purchases of property, plant and equipment (14,835) (7,459)
Proceeds from sale of services businesses - 34,267
Proceeds from sale and maturities
of available-for-sale investments - 13,000
Other 3,686 2,065
--------- ---------
Net cash used in investing
activities $(264,334) $ (4,575)
--------- ---------
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THERMO INSTRUMENT SYSTEMS INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
-----------------------------
September 28, September 30,
(In thousands) 1996 1995
---------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of Company and
subsidiaries' common stock (Note 3) $ 109,974 $ 37,630
Proceeds from issuance of notes payable to
parent company (Note 2) 110,000 15,000
Proceeds from issuance of long-term
obligations - 93,994
Repayment of notes payable to parent
company (Note 2) (30,000) (15,000)
Increase (decrease) in short-term obligations (10,317) 606
Repayment of long-term obligations (4,892) (1,060)
--------- ---------
Net cash provided by
financing activities 174,765 131,170
--------- ---------
Exchange Rate Effect on Cash 1,770 1,174
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (32,873) 157,240
Cash and Cash Equivalents at Beginning of Period 395,233 152,933
--------- ---------
Cash and Cash Equivalents at End of Period $ 362,360 $ 310,173
========= =========
Noncash Activities:
Fair value of assets of acquired companies $ 471,509 $ 81,375
Cash paid for acquired companies (253,069) (48,774)
--------- ---------
Liabilities assumed of acquired companies $ 218,440 $ 32,601
========= =========
Conversions of convertible obligations (Note 4) $ 64,576 $ 15,272
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO INSTRUMENT SYSTEMS INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Instrument Systems 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 September 28, 1996, the results of operations for the three- and
nine-month periods ended September 28, 1996 and September 30, 1995, and
the cash flows for the nine-month periods ended September 28, 1996 and
September 30, 1995. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of December 30, 1995,
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 30, 1995, filed
with the Securities and Exchange Commission.
2. Acquisitions
On March 29, 1996, the Company completed the acquisition of a
substantial portion of the businesses comprising the Scientific
Instruments Division of Fisons plc (Fisons), a wholly owned subsidiary of
Rhone-Poulenc Rorer Inc., for approximately 123.7 million British pounds
sterling in cash (approximately $189.2 million) and the assumption of
approximately 30.8 million British pounds sterling of indebtedness
(approximately $47.1 million). The purchase price is subject to
post-closing adjustments equal to the amounts by which the net tangible
assets and net debt of the acquired businesses on the closing date are
greater or less than certain target amounts agreed to by the parties. The
Company and Fisons are attempting to agree on the required adjustment to
the purchase price. The Company is seeking a reduction in the purchase
price based on its calculation of the net tangible assets of the acquired
businesses. If the parties are unable to reach agreement, a firm of
independent public accountants will be appointed to determine the
adjustment. Although there can be no assurance that the Company will
receive a reduction in the purchase price from Fisons, any such
adjustment would affect the purchase price allocation including the
amount allocated to cost in excess of net assets of acquired companies.
To finance the acquisition of a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons, the
Company used available cash in addition to borrowings of $89.0 million
from Thermo Electron Corporation (Thermo Electron). On April 12, 1996,
the Company repaid a portion of the borrowings from Thermo Electron and
issued a $65.0 million promissory note due April 1997 for the remaining
indebtedness. The promissory note was repaid in October 1996.
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THERMO INSTRUMENT SYSTEMS INC.
2. Acquisitions (continued)
In the first quarter of 1996, the Company wrote off $3.5 million of
acquired technology in connection with this acquisition. The businesses
acquired are involved in the research, development, manufacture, and sale
of analytical instruments to industrial and research laboratories
worldwide.
During the first nine months of 1996, the Company made several other
acquisitions for approximately $63.8 million in cash, subject to
post-closing adjustments. To partially finance one of the acquisitions,
the Company's Thermo BioAnalysis Corporation (Thermo BioAnalysis)
subsidiary borrowed $30.0 million from Thermo Electron pursuant to a
promissory note, which was repaid in July 1996.
These acquisitions have been accounted for using the purchase method
of accounting and their results of operations have been included in the
accompanying financial statements from their respective dates of
acquisition. The cost of the acquisitions exceeded the estimated fair
value of the acquired net assets by $205.1 million, which is being
amortized over 40 years. Allocation of the purchase price for these
acquisitions was based on estimates of the fair value of the net assets
acquired and is subject to adjustment upon finalization of the purchase
price allocation.
Based on unaudited data, the following table presents selected
financial information for the Company and the businesses acquired from
Fisons on a pro forma basis, assuming the companies had been combined
since the beginning of 1995. The effect of the acquisitions not included
in the pro forma data was not material to the Company's results of
operations and financial position.
Three Nine
Months Ended Months Ended
------------- -----------------------------
(In thousands except September 30, September 28, September 30,
per share amounts) 1995 1996 1995
------------------------------------------------------------------------
Revenues $271,143 $931,877 $773,319
Income from continuing
operations 15,091 78,846 26,960
Earnings per share from
continuing operations:
Primary .17 .83 .30
Fully diluted .15 .77 .29
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of the businesses from Fisons been made at the beginning of
1995.
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THERMO INSTRUMENT SYSTEMS INC.
2. Acquisitions (continued)
In connection with the acquisition of a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons, the
Company has undertaken a restructuring of the acquired businesses. In
accordance with the requirements of Emerging Issues Task Force
Pronouncement 95-3 (EITF 95-3), the Company is in the process of
developing a plan that is expected to include reductions in staffing
levels, abandonment of excess facilities, and possible other costs
associated with exiting certain activities of the acquired businesses. As
part of the cost of the acquisition, the Company established reserves
totaling $35.2 million for estimated severance, excess facilities, and
other exit costs associated with the acquisition, $10.0 million of which
was expended during the first nine months of 1996, primarily for
severance. Unresolved issues existing at September 28, 1996, included
further identifying specific employees for termination and locations to
be abandoned or consolidated, among other decisions concerning the
integration of the acquired businesses into the Company. In accordance
with EITF 95-3, finalization of the Company's plan for restructuring the
acquired businesses will not occur beyond one year from the date of the
acquisition. Any changes in estimates of these costs prior to such
finalization will be recorded as adjustments to cost in excess of net
assets of acquired companies.
3. Issuance of Stock by Subsidiaries
In March and April 1996, the Company's wholly owned ThermoQuest
Corporation (ThermoQuest) subsidiary sold 3,450,000 shares of its common
stock in an initial public offering at $15.00 per share for net proceeds
of approximately $47.8 million, resulting in a gain of approximately
$27.2 million. Following the initial public offering, the Company owned
93% of ThermoQuest's outstanding common stock.
In June and July 1996, the Company's wholly owned Thermo Optek
Corporation (Thermo Optek) subsidiary sold 3,450,000 shares of its common
stock at $13.50 per share for net proceeds of approximately $42.9
million, resulting in a gain of approximately $25.1 million. Following
the initial public offering, the Company owned 93% of Thermo Optek's
outstanding common stock.
In September 1996, Thermo BioAnalysis sold 1,500,000 shares of its
common stock at $14.00 per share for net proceeds of approximately $18.6
million, resulting in a gain of $8.8 million. Subsequent to the end of
the quarter, the underwriters of Thermo BioAnalysis' initial public
offering exercised their over-allotment option to purchase an additional
170,000 shares of Thermo BioAnalysis common stock for net proceeds of
approximately $2.2 million. Following the initial public offering and the
exercise of the over-allotment option, the Company owned 67% of Thermo
BioAnalysis' outstanding common stock.
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THERMO INSTRUMENT SYSTEMS INC.
4. Redemption of Convertible Debentures
In April 1996, the Company called for redemption on May 9, 1996, all
of the outstanding principal amount of its 6 5/8% subordinated
convertible debentures due 2001. During the three months ended June 29,
1996, the entire principal amount of the debentures outstanding at March
30, 1996, was converted into the Company's common stock.
5. Subsequent Event
In October 1996, the Company issued and sold $172.5 million
principal amount of 4 1/2% senior convertible debentures due 2003. The
debentures are convertible into shares of the Company's common stock at a
price of $43.07 per share and are guaranteed by Thermo Electron. In lieu
of issuing all or a portion of the Company's common stock upon
conversion, the Company has the option to deliver shares of Thermo
Electron common stock with an aggregate value equal to the market value
of the Company's common stock otherwise issuable upon such conversion.
Thermo Electron has agreed to sell at market prices such number of shares
of its common stock to the Company as the Company may require to exercise
such option.
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.
These statements involve a number of risks and uncertainties, including
those detailed in Item 5 of this Quarterly Report on Form 10-Q.
Results of Operations
Third Quarter 1996 Compared With Third Quarter 1995
Revenues increased $121.4 million, or 63%, to $315.3 million in the
third quarter of 1996 from $193.9 million in the third quarter of 1995
primarily due to acquisitions, which included a substantial portion of
the businesses comprising the Scientific Instruments Division of Fisons
plc (Fisons) in March 1996 (Note 2), the analytical instrument division
of Analytical Technology, Inc. (ATI) in December 1995, and the DYNEX
Technologies (DYNEX) division of Dynatech Corporation in February 1996.
Acquisitions added revenues of $116.4 million in the third quarter of
1996. The remainder of the increase in revenues resulted primarily from
greater demand experienced by the Company's mass spectrometry business as
a result of a product introduced in the first quarter of 1996 and, to a
lesser extent, increased demand at the Company's Fourier transform
infrared and atomic absorption and atomic emission spectrometry
businesses. These increases were offset in part by a decrease of $4.3
million in revenues due to the unfavorable effects of currency
translation as a result of the strengthening of the U.S. dollar relative
to foreign currencies in countries in which the Company operates.
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THERMO INSTRUMENT SYSTEMS INC.
Third Quarter 1996 Compared With Third Quarter 1995 (continued)
The gross profit margin decreased to 47% in the third quarter of
1996 from 48% in the third quarter of 1995 primarily due to lower margins
at acquired businesses, including the businesses acquired from Fisons.
Selling, general and administrative expenses as a percentage of
revenues remained unchanged at 29% in the third quarter of 1996 and 1995.
Research and development expenses as a percentage of revenues remained
relatively unchanged at 7.0% in 1996, compared with 7.2% in 1995.
Interest income increased to $4.8 million in the third quarter of
1996 from $3.8 million in the third quarter of 1995 primarily due to
interest income earned on invested proceeds from the issuance of $192.5
million aggregate principal amount of 5% subordinated convertible
debentures by the Company's ThermoQuest Corporation (ThermoQuest) and
Thermo Optek Corporation (Thermo Optek) subsidiaries in August 1995 and
October 1995, respectively, and, to a lesser extent, from the issuance of
common stock by ThermoQuest and Thermo Optek in the first and second
quarters of 1996, respectively. The increase in interest income was
offset in part by a reduction in cash as a result of the acquisitions of
a substantial portion of the businesses comprising the Scientific
Instruments Division of Fisons in March 1996 and DYNEX in February 1996.
Interest expense increased to $7.2 million in 1996 from $4.5 million in
1995 primarily due to the issuance of the 5% subordinated convertible
debentures by ThermoQuest and Thermo Optek. To a lesser extent, interest
expense increased due to the issuance by the Company of a $65.0 million
promissory note to Thermo Electron Corporation (Thermo Electron) to
partially finance the acquisition of the businesses from Fisons and the
inclusion of interest expense on the debt assumed as part of the Fisons
acquisition. The $65.0 million promissory note was repaid in October
1996. These increases were offset in part by the conversion of a portion
of the Company's convertible obligations into common stock of the
Company.
The Company has adopted a strategy of spinning out certain of its
businesses into separate subsidiaries and having these subsidiaries sell
a minority interest to outside investors. The Company believes that this
strategy provides additional motivation and incentives for the management
of the subsidiaries through the establishment of subsidiary-level stock
option incentive programs, as well as capital to support the
subsidiaries' growth. As a result of the sale of stock by subsidiaries,
the Company recorded gains of $11.4 million in the third quarter of 1996
and $9.3 million in the third quarter of 1995 (Note 3). The size and
timing of these transactions are dependent on market and other conditions
that are beyond the Company's control. Accordingly, there can be no
assurance that the Company will be able to realize gains from such
transactions in the future.
The effective tax rate decreased to 28% in the third quarter of 1996
from 31% in the third quarter of 1995 primarily due to a higher
nontaxable gain on issuance of stock by subsidiaries in 1996 compared
with 1995. Excluding the impact of the gain on issuance of stock by
subsidiaries in 1996 and 1995, the effective tax rates in 1996 and 1995
exceeded the statutory federal income tax rate due to nondeductible
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THERMO INSTRUMENT SYSTEMS INC.
Third Quarter 1996 Compared With Third Quarter 1995 (continued)
amortization of cost in excess of net assets of acquired companies, the
inability to provide a tax benefit on losses incurred at certain foreign
subsidiaries, and the impact of state income taxes. The effective tax
rate decreased in 1996 from 1995 due to the effect in 1995 of losses at
certain of the Company's foreign subsidiaries for which the Company was
unable to provide a tax benefit.
First Nine Months 1996 Compared With First Nine Months 1995
Revenues increased $309.8 million, or 56%, to $862.4 million in the
first nine months of 1996 from $552.6 million in the first nine months of
1995 primarily due to acquisitions, which included the acquisitions
discussed in the results of operations for the third quarter.
Acquisitions added revenues of $287.0 million in the first nine months of
1996. The remainder of the increase in revenues resulted from greater
demand at the Company's mass spectrometry and Fourier transform infrared
businesses as a result of recently introduced products. These increases
were offset in part by a decrease of $14.3 million in revenues due to the
unfavorable effects of currency translation as a result of the
strengthening of the U.S. dollar relative to foreign currencies in
countries in which the Company operates.
The gross profit margin decreased to 46% in the first nine months of
1996 from 49% in the first nine months of 1995 primarily due to lower
margins at acquired businesses.
Selling, general and administrative expenses as a percentage of
revenues remained unchanged at 29% in the first nine months of 1996 and
1995. Research and development expenses as a percentage of revenues
remained relatively unchanged at 7.2% in 1996, compared with 7.3% in
1995.
In the first quarter of 1996, the Company wrote off $3.5 million of
acquired technology in connection with the acquisition of the businesses
from Fisons (Note 2).
Interest income increased to $14.2 million in the first nine months
of 1996 from $9.0 million in the first nine months of 1995 primarily due
to the reasons discussed in the results of operations for the third
quarter. Interest expense increased to $20.8 million in 1996 from $12.2
million in 1995 primarily due to the issuance of $192.5 million principal
amount of 5% subordinated convertible debentures by ThermoQuest and
Thermo Optek in August 1995 and October 1995, respectively. To a lesser
extent, interest expense increased due to the issuance by the Company of
a $65.0 million promissory note to Thermo Electron, which was repaid in
October 1996, to partially finance the acquisition of the businesses from
Fisons, the inclusion of interest expense on the debt assumed as part of
the Fisons acquisition, and the issuance by the Company's Thermo
BioAnalysis Corporation (Thermo BioAnalysis) subsidiary of a $30.0
million promissory note to Thermo Electron, which was repaid in July
1996. These increases were offset in part by the conversion of a portion
of the Company's convertible obligations into common stock of the
Company.
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THERMO INSTRUMENT SYSTEMS INC.
First Nine Months 1996 Compared With First Nine Months 1995 (continued)
As a result of the sale of stock by subsidiaries, the Company
recorded gains of $61.1 million in the first nine months of 1996 and
$18.9 million in the first nine months of 1995 (Note 3).
The effective tax rate decreased to 25% in the first nine months of
1996 from 33% in the first nine months of 1995 primarily due to a higher
nontaxable gain on issuance of stock by subsidiaries in 1996 compared
with 1995. Excluding the impact of the gain on issuance of stock by
subsidiaries in 1996 and 1995, the effective tax rates in 1996 and 1995
exceeded the statutory federal income tax rate due to nondeductible
amortization of cost in excess of net assets of acquired companies, the
write-off of acquired technology in connection with the acquisition of
the businesses from Fisons in the first quarter of 1996, the inability to
provide a tax benefit on losses incurred at certain foreign subsidiaries,
and the impact of state income taxes.
Liquidity and Capital Resources
Consolidated working capital was $420.6 million at September 28,
1996, compared with $489.9 million at December 30, 1995, a decrease of
$69.3 million. Included in working capital are cash, cash equivalents,
and available-for-sale investments of $372.9 million at September
28, 1996 and $395.2 million at December 30, 1995. Of the $372.9 million
balance at September 28, 1996, $167.1 million was held by ThermoQuest,
$114.2 million by Thermo Optek, $17.5 million by the Company's
ThermoSpectra Corporation (ThermoSpectra) subsidiary, $42.8 million by
Thermo BioAnalysis, and $31.3 million by the Company and its wholly owned
subsidiaries. The Company's operating activities provided $54.9 million
of cash in the first nine months of 1996. A decrease in accounts
receivable provided cash of $12.3 million during the first nine months of
1996, due in large part to improved collections at one of ThermoQuest's
foreign subsidiaries. Accounts payable decreased $15.7 million primarily
due to a payment for inventories received during the fourth quarter of
1995 and, to a lesser extent, a reduction in payables at certain of the
businesses acquired from Fisons in March 1996. Other current liabilities
decreased $23.3 million primarily due to restructuring expenditures at
businesses acquired by the Company in 1996.
The Company's investing activities used $264.3 million of cash in
the first nine months of 1996. The Company expended $242.9 million for
acquisitions, including the acquisition of a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons
(Note 2), and $14.8 million for the purchase of property, plant and
equipment.
The Company's financing activities provided $174.8 million of cash
in the first nine months of 1996. In March and April 1996, ThermoQuest
sold shares of its common stock in an initial public offering for net
proceeds of approximately $47.8 million. In June and July 1996, Thermo
Optek sold shares of its common stock in an initial public offering for
net proceeds of approximately $42.9 million. In September 1996, Thermo
BioAnalysis sold shares of its common stock in an initial public offering
for net proceeds of approximately $18.6 million (Note 3). In February
14PAGE
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THERMO INSTRUMENT SYSTEMS INC.
Liquidity and Capital Resources (continued)
1996, to partially finance the acquisition of DYNEX, Thermo BioAnalysis
borrowed $30.0 million from Thermo Electron pursuant to a promissory
note, which was repaid in July 1996 (Note 2). In March 1996, to partially
finance the acquisition of the businesses from Fisons, the Company
borrowed $89.0 million from Thermo Electron. In April 1996, the Company
repaid a portion of the borrowings from Thermo Electron and issued a
$65.0 million promissory note due April 1997 for the remaining
indebtedness. The promissory note was repaid in October 1996 (Note 2). In
August 1996, to partially finance the acquisition of certain of the
Fisons businesses from the Company, ThermoSpectra borrowed $15.0 million
from Thermo Electron pursuant to a promissory note due August 1998 and
bearing interest at the 90-day Commercial Paper Composite Rate plus 25
basis points, set at the beginning of each quarter. During the first nine
months of 1996, the Company repaid $15.2 million of short- and long-term
obligations.
In October 1996, the Company issued and sold $172.5 million
principal amount of 4 1/2% senior convertible debentures due 2003
(Note 5).
During the remainder of 1996, the Company plans to make expenditures
of approximately $4 million for property, plant and equipment. The
Company believes that its existing resources are sufficient to meet the
capital requirements of its existing operations for the foreseeable
future. The Company has historically complemented internal development
with acquisitions of businesses or technologies that extend the Company's
presence in current markets or provide opportunities to enter and compete
effectively in new markets. The Company will consider making acquisitions
of such businesses or technologies that are consistent with its plans for
strategic growth.
PART II - OTHER INFORMATION
Item 5 - Other Information
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in 1996 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Risks Associated with Spin-Out of Subsidiaries. The Company has
adopted a strategy of spinning out certain of its businesses into
separate subsidiaries and having these subsidiaries sell a minority
interest to outside investors. As a result of the sale of stock by
subsidiaries, the issuance of stock by subsidiaries upon conversion of
convertible debentures and similar transactions, the Company records
gains that represent the increase in the Company's net investment in the
subsidiaries. These gains have represented a substantial portion of the
net income reported by the Company in certain periods. The size and
15PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Item 5 - Other Information (continued)
timing of these transactions are dependent on market and other conditions
that are beyond the Company's control. Accordingly, there can be no
assurance that the Company will be able to generate gains from such
transactions in the future.
In addition, in October 1995, the Financial Accounting Standards
Board (FASB) issued an exposure draft of a Proposed Statement of
Financial Accounting Standards, "Consolidated Financial Statements:
Policy and Procedures" (the Proposed Statement). The Proposed Statement
would establish new rules for how consolidated financial statements
should be prepared. If the Proposed Statement is adopted, there could be
significant changes in the way the Company records certain transactions
of its controlled subsidiaries. Among those changes, any sale of the
stock of a subsidiary that does not result in a loss of control would be
accounted for as a transaction in equity of the consolidated entity with
no gain or loss being recorded. The FASB expects to issue a final
statement or a revised exposure draft in calendar 1997.
Uncertainty of Growth. Certain of the markets in which the Company
competes have been flat or declining over the past several years. The
Company has identified a number of strategies it believes will allow it
to grow its business, including acquiring complementary businesses;
developing new applications for its technologies; and strengthening its
presence in selected geographic markets. No assurance can be given that
the Company will be able to successfully implement these strategies, or
that these strategies will result in growth of the Company's business.
Risks Associated with Acquisition Strategy. One of the Company's
growth strategies is to supplement its internal growth with the
acquisition of businesses and technologies that complement or augment the
Company's existing product lines. Certain businesses acquired by the
Company within the past year, including businesses within the former
analytical instrument division of Analytical Technology, Inc. and the
former Scientific Instruments Division of Fisons plc, have had low levels
of profitability. In addition, businesses that the Company may seek to
acquire in the future may also be marginally profitable or unprofitable.
In order for any acquired businesses to achieve the level of
profitability desired by the Company, the Company must successfully
change operations and improve market penetration. No assurance can be
given that the Company will be successful in this regard. In addition,
promising acquisitions are difficult to identify and complete for a
number of reasons, including competition among prospective buyers and the
need for regulatory approvals, including antitrust approvals. There can
be no assurance that the Company will be able to complete pending or
future acquisitions. In order to finance any such acquisitions, it may be
necessary for the Company to raise additional funds either through public
or private financings. Any equity or debt financing, if available at all,
may be on terms which are not favorable to the Company and may result in
dilution to the Company's shareholders.
Risks Associated with Technological Change, Obsolescence and the
Development and Acceptance of New Products. The market for the Company's
products and services is characterized by rapid and significant
16PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Item 5 - Other Information (continued)
technological change and evolving industry standards. New product
introductions responsive to these factors require significant planning,
design, development and testing at the technological, product and
manufacturing process levels, and may render existing products and
technologies uncompetitive or obsolete. There can be no assurance that
the Company's products will not become uncompetitive or obsolete. In
addition, industry acceptance of new technologies developed by the
Company may be slow to develop due to, among other things, existing
regulations written specifically for older technologies and general
unfamiliarity of users with new technologies.
Possible Adverse Effect From Consolidation in the Environmental
Market and Changes in Environmental Regulations. One of the important
markets for the Company's products is environmental analysis. During the
past three years, there has been a contraction in the market for
analytical instruments used for environmental analysis. This contraction
has caused consolidation in the businesses serving this market. Such
consolidation may have an adverse impact on certain of the Company's
businesses. In addition, most air, water, and soil analysis is conducted
to comply with Federal, state, local, and foreign environmental
regulations. These regulations are frequently specific as to the type of
technology required for a particular analysis and the level of detection
required for that analysis. The Company develops, configures, and markets
its products to meet customer needs created by existing and anticipated
environmental regulations. These regulations may be amended or eliminated
in response to new scientific evidence or political or economic
considerations. Any significant change in environmental regulations could
result in a reduction in demand for the Company's products.
Risks Associated With the Sale of Products to the Pharmaceutical
Industry. The pharmaceutical industry is one of the important markets for
the Company's products. Although the Company's existing general purpose
analytical equipment and services are not subject to regulation by the
U.S. Food and Drug Administration (the FDA), FDA regulations apply to the
processes and production facilities used to manufacture pharmaceutical
products. Any material change by a pharmaceutical company in its
manufacturing process or equipment could necessitate additional FDA
review and approval. Such requirements may make it more difficult for the
Company to sell its products and services to pharmaceutical customers
that have already applied for or obtained approval for production
processes using different equipment and supplies. Any changes in the
regulations that apply to the processes and production facilities used to
manufacture pharmaceutical products may adversely affect the market for
the Company's products. In addition, from time to time as a result of
industry consolidation and other factors, the pharmaceutical industry has
reduced its capital expenditures for equipment such as that manufactured
by the Company, and there can be no assurance that further changes in the
pharmaceutical industry will not adversely affect demand for the
Company's products.
Risks Associated With Dependence on Capital Spending Policies and
Government Funding. The Company's customers include pharmaceutical and
chemical companies, laboratories, government agencies, and public and
17PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Item 5 - Other Information (continued)
private research institutions. The capital spending of these entities can
have a significant effect on the demand for the Company's products. Such
spending levels are based on a wide variety of factors, including the
resources available to make such purchases, the spending priorities among
various types of research equipment, public policy, and the effects of
different economic cycles. Any decrease in capital spending by any of the
customer groups that account for a significant portion of the Company's
sales could have a material adverse effect on the Company's business and
results of operations.
Possible Adverse Impact of Significant International Operations.
Sales outside the United States accounted for approximately 61% of the
Company's revenues in 1995, and the Company expects that international
sales will continue to account for a significant portion of the Company's
revenues in the future. Sales to customers in foreign countries are
subject to a number of risks, including the following: agreements may be
difficult to enforce and receivables difficult to collect through a
foreign country's legal system; foreign customers may have longer payment
cycles; foreign countries could impose withholding taxes or otherwise tax
the Company's foreign income, impose tariffs, or adopt other restrictions
on foreign trade; fluctuations in exchange rates may affect product
demand and adversely affect the profitability in U.S. dollars of products
and services provided by the Company in foreign markets where payment for
the Company's products and services is made in the local currency; export
licenses, if required, may be difficult to obtain and the protection of
intellectual property in foreign countries may be more difficult to
enforce. There can be no assurance that any of these factors will not
have a material adverse effect on the Company's business and results of
operations.
Competition. The Company encounters and expects to continue to
encounter intense competition in the sale of its products. The Company
believes that the principal competitive factors affecting the market for
its products include product performance, price, reliability, and
customer service. The Company's competitors include large multinational
corporations and their operating units. Some of the Company's other
competitors have substantially greater financial, marketing, and other
resources than those of the Company. As a result, they may be able to
adapt more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the promotion
and sale of their products than the Company. In addition, competition
could increase if new companies enter the market or if existing
competitors expand their product lines or intensify efforts within
existing product lines. There can be no assurance that the Company's
current products, products under development or ability to discover new
technologies will be sufficient to enable it to compete effectively with
its competitors.
Risks Associated with Protection, Defense and Use of Intellectual
Property. The Company holds many patents relating to various aspects of
its products, and believes that proprietary technical know-how is
critical to many of its products. Proprietary rights relating to the
Company's products are protected from unauthorized use by third parties
18PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Item 5 - Other Information (continued)
only to the extent that they are covered by valid and enforceable patents
or are maintained in confidence as trade secrets. There can be no
assurance that patents will issue from any pending or future patent
applications owned by or licensed to the Company or that the claims
allowed under any issued patents will be sufficiently broad to protect
the Company's technology and, in the absence of patent protection, the
Company may be vulnerable to competitors who attempt to copy the
Company's products or gain access to its trade secrets and know-how.
Proceedings initiated by the Company to protect its proprietary rights
could result in substantial costs to the Company. There can be no
assurance that competitors of the Company will not initiate litigation to
challenge the validity of the Company's patents, or that they will not
use their resources to design comparable products that do not infringe
the Company's patents. There may also be pending or issued patents held
by parties not affiliated with the Company that relate to the Company's
products or technologies. The Company may need to acquire licenses to, or
contest the validity of, any such patents. There can be no assurance that
any license required under any such patent would be made available on
acceptable terms or that the Company would prevail in any such contest.
The Company could incur substantial costs in defending itself in suits
brought against it or in suits in which the Company may assert its patent
rights against others. If the outcome of any such litigation is
unfavorable to the Company, the Company's business and results of
operations could be materially adversely affected. In addition, the
Company relies on trade secrets and proprietary know-how which it seeks
to protect, in part, by confidentiality agreements with its
collaborators, employees, and consultants. There can be no assurance that
these agreements will not be breached, that the Company would have
adequate remedies for any breach or that the Company's trade secrets will
not otherwise become known or be independently developed by competitors.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
19PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS 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 6th day of November
1996.
THERMO INSTRUMENT SYSTEMS INC.
Paul F. Kelleher
----------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
----------------------------
John N. Hatsopoulos
Chief Financial Officer
20PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
-----------------------------------------------------------------------
10.1 Stock Holding Assistance Plan and Form of
Promissory Note.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
THERMO INSTRUMENTS SYSTEMS INC.
STOCK HOLDINGS ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit Thermo Instrument
Systems Inc. (the "Company") and its stockholders by encouraging
Key Employees to acquire and maintain share ownership in the
Company, by increasing such employees' proprietary interest in
promoting the growth and performance of the Company and its
subsidiaries and by providing for the implementation of the
Guidelines.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: Thermo Instrument Systems Inc., a Delaware
corporation.
Guidelines: The Stock Holdings Guidelines for Key Employees
of the Company, as established by the Committee from time to
time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The Thermo Instrument Systems Inc. Stock Holdings
Assistance Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Guidelines shall be administered by the
Committee, which shall have authority to interpret the Plan and
the Guidelines and, subject to their provisions, to prescribe,
amend and rescind any rules and regulations and to make all other
determinations necessary or desirable for the administration
thereof. The Committee's interpretations and decisions with
regard to the Plan and the Guidelines and such rules and
PAGE
<PAGE>
regulations as may be established thereunder shall be final and
conclusive. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or the
Guidelines, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Guidelines that is made in good
faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Guidelines is, in the
judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Guidelines. Such Loans
may be used solely for the purpose of acquiring Common Stock
(other than upon the exercise of stock options or under employee
stock purchase plans) in open market transactions or from the
Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
---------
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Guidelines,
as the Committee shall determine in its sole and absolute
discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable in five equal annual installments
commencing on the first anniversary date of the making of such
Loan. Each Loan shall also become immediately due and payable in
2PAGE
<PAGE>
full, without demand, upon the occurrence of any of the events
set forth in the Note; provided that the Committee may, in its
sole and absolute discretion, authorize an extension of the time
for repayment of a Loan upon such terms and conditions as the
Committee may determine.
3PAGE
<PAGE>
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Guidelines in any respect, or terminate the Plan or the
Guidelines at any time. No such amendment or termination,
however, shall alter or otherwise affect the terms and conditions
of any Loan then outstanding to Key Employee without such Key
Employee's written consent, except as otherwise provided herein
or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Guidelines by the Company, the Board of Directors of the
Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
The Plan and the Guidelines shall become effective upon
approval and adoption by the Committee.
4PAGE
<PAGE>
EXHIBIT A
THERMO INSTRUMENT SYSTEMS INC.
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to Thermo Instrument Systems Inc. (the
"Company"), or assigns, ON DEMAND, but in any case on or before
[insert date which is the fifth anniversary of date of issuance]
(the "Maturity Date"), the principal sum of [loan amount in
words] ($_______), or such part thereof as then remains unpaid,
without interest. Principal shall be payable in lawful money of
the United States of America, in immediately available funds, at
the principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay the Company, on
each of the first four anniversary dates of the date hereof, an
amount equal to 20% of the initial principal amount of the Note.
Payment of the final 20% of the initial principal amount, if no
demand has been made by the Company, shall be due and payable on
the Maturity Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holdings Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee,
5PAGE
<PAGE>
the filing by or against the Employee of any petition under
the United States Bankruptcy Code (or the filing of any
similar petition under the insolvency law of any
jurisdiction), or the making by the Employee of an
assignment or trust mortgage for the benefit of creditors or
the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction
not removed, repealed or dismissed within thirty (30) days
of issuance, against or affecting the person or property of
the Employee or any liability or obligation of the Employee
to the Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
The Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holdings Assistance Plan and shall be governed by and construed
in accordance with, such Plan and the laws of the State of
Delaware and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
Exhibit 11
THERMO INSTRUMENT SYSTEMS INC.
Computation of Earnings per Share
Three Months Ended
------------------------------
September 28, September 30,
1996 1995
------------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share:
Income:
Net income $ 30,521,000 $ 21,881,000
Add: Convertible obligation interest,
net of tax 920,000 1,392,000
------------ ------------
Income applicable to common stock
assuming full dilution (a) $ 31,441,000 $ 23,273,000
------------ ------------
Shares:
Weighted average shares outstanding 96,598,450 91,129,958
Add: Shares issuable from assumed
conversion of convertible
obligations 9,824,508 15,005,620
Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) 1,044,162 670,453
------------ ------------
Weighted average shares outstanding,
as adjusted (b) 107,467,120 106,806,031
------------ ------------
Fully Diluted Earnings per Share (a)/(b) $ .29 $ .22
============ ============
PAGE
<PAGE>
Exhibit 11
THERMO INSTRUMENT SYSTEMS INC.
Computation of Earnings per Share (continued)
Nine Months Ended
-----------------------------
September 28, September 30,
1996 1995
------------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share from Continuing Operations:
Income:
Income from continuing operations $ 99,860,000 $ 57,468,000
Add: Convertible obligation interest,
net of tax 3,324,000 4,352,000
------------ ------------
Income applicable to common stock
assuming full dilution (a) $103,184,000 $ 61,820,000
------------ ------------
Shares:
Weighted average shares outstanding 94,515,716 90,275,605
Add: Shares issuable from assumed
conversion of convertible
obligations 11,850,409 15,752,865
Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) 1,044,162 670,453
------------ ------------
Weighted average shares outstanding,
as adjusted (b) 107,410,287 106,698,923
------------ ------------
Fully Diluted Earnings per Share
from Continuing Operations (a)/(b) $ .96 $ .58
============ ============
PAGE
<PAGE>
Exhibit 11
THERMO INSTRUMENT SYSTEMS INC.
Computation of Earnings per Share (continued)
Nine Months Ended
-----------------------------
September 28, September 30,
1996 1995
-----------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share:
Income:
Net income $ 99,860,000 $ 57,470,000
Add: Convertible obligation interest,
net of tax 3,324,000 4,352,000
------------ ------------
Income applicable to common stock
assuming full dilution (a) $103,184,000 $ 61,822,000
------------ ------------
Shares:
Weighted average shares outstanding 94,515,716 90,275,605
Add: Shares issuable from assumed
conversion of convertible
obligations 11,850,409 15,752,865
Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) 1,044,162 670,453
------------ ------------
Weighted average shares outstanding,
as adjusted (b) 107,410,287 106,698,923
------------ ------------
Fully Diluted Earnings per Share (a)/(b) $ .96 $ .58
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
INSTRUMENT SYSTEMS INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 362,360
<SECURITIES> 10,562
<RECEIVABLES> 311,033
<ALLOWANCES> 18,335
<INVENTORY> 228,240
<CURRENT-ASSETS> 963,633
<PP&E> 251,229
<DEPRECIATION> 68,957
<TOTAL-ASSETS> 1,763,747
<CURRENT-LIABILITIES> 543,026
<BONDS> 229,953
0
0
<COMMON> 9,744
<OTHER-SE> 696,030
<TOTAL-LIABILITY-AND-EQUITY> 1,763,747
<SALES> 862,415
<TOTAL-REVENUES> 862,415
<CGS> 462,724
<TOTAL-COSTS> 462,724
<OTHER-EXPENSES> 65,469
<LOSS-PROVISION> 2,140
<INTEREST-EXPENSE> 20,765
<INCOME-PRETAX> 137,909
<INCOME-TAX> 34,807
<INCOME-CONTINUING> 99,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 99,860
<EPS-PRIMARY> 1.06
<EPS-DILUTED> .96
</TABLE>
